City Chic CEO Phil Ryan grew up on the cutting room floor of his parents’ clothing manufacturing, retail and wholesale business, gaining first-hand knowledge of nearly every aspect of the fashion industry, from garment factories, to buying trips, to planning meetings – and everything in between.
“It’s sort of been my life from a young age; I understand every part of it,” Ryan tells IRW.
In 2007, Ryan, then a general manager at Specialty Fashion Group (SFG), was tasked with growing the City Chic brand. He says the brand barely existed at that stage, but together with a handful of like-minded staff – some of whom remain at City Chic with Ryan to this day – he established a highly successful plus-size fashion brand, selling to young women in Australia and overseas in the US, UK, Europe and New Zealand.
Here, Ryan talks about the key factors in the brand’s success, and the challenges – and opportunities – City Chic faces as a standalone brand, after Noni B earlier this year acquired its SFG stablemates Millers, Katies, Crossroads, Autograph and Rivers.
Inside Retail Weekly: In contrast to many fashion retailers, City Chic’s same-store sales grew in the double digits in FY18. Does this have to do with the market you’re in (plus-size fashion looks much healthier than the overall sector), or is City Chic doing something right, that others aren’t?
Phil Ryan: I believe there are a few key reasons for that. My executive team is made up of five people who have been with the business for the past 10 years. The head of brand was one of the first six people to join the business with me, and the head of design and head of planning have been here for almost 11 years. I believe that depth of knowledge of our customer is what sets us apart, as well as the high level of trust and interdependence we have as an executive team.
The customer-first mentality is also very strong at City Chic. We can deliver garments in six to eight weeks out of China on a repeat order. That allows us to chase demand in-season, it allows us to let her [our customer] tell us what she likes. On top of repeats, we alter our range in-season based on what she wants all the time. If we thought off-the-shoulder tops were the hottest thing, but they’re not selling, we can make changes to that really quickly.
We’re able to do this because we work with a few suppliers in China that really understand our model. I spent two years trying out suppliers and landed on a few that were prepared to hold back production space and people to help us achieve this.
IRW: Zara famously solicits feedback from its store staff about what’s selling and what’s not, and loops them into the design process. Does City Chic have a similar process in place for making in-season changes?
PR: The team sits down every Monday and reviews the sales and makes those decisions. We’re probably not as sophisticated as Zara, but we look at the data she [our customer] gives us every week and we look to the people in the room to react. We keep it simple; we don’t try to reinvent the wheel every time. We’ve done this – the same human beings have done this – for 11 years, so we have a high understanding of her, what she wants and how we can deliver it. We have an innate knowledge of who our customer is; you can’t replace that.
Our stores aren’t as big and don’t turn over as much volume as Zara stores, so you might get a read from one store that doesn’t reflect what’s happening across the board. What we have are simple data structures that give us the information we need and the people that can act on it.
IRW: How do you weigh up the advantages of having a really experienced executive team with having new people bring fresh eyes and ideas to the business?
PR: I haven’t really thought about this, but my first reaction is that commercially we probably do understand her [our customer] better than anyone else. You can’t learn about the customer in a season or even two seasons. To really understand and internalise what a market wants requires a lot of time. You can’t go back and understand three to four years’ worth of product data when we’re doing 250 products a month. We have that knowledge together [as an executive team], and we question each other. Given the time [we’ve spent together] and the trust we have, our ability to ask hard questions is probably what keeps us fresh and delivering consistent results.
The other thing [experience gives you] is clarity around your market position. We have a high level of clarity around who we are. That’s the debate we’re always having from an ops, product, brand and planning perspective: where are the edges of being ‘bold, sexy glam and chic’? We have that internal compass that keeps us focused on her [our customer]. We had one year when we felt we had to follow the trends and have a more fashion-led model, and because we’re open and honest with each other, we were able to look at what the data was telling us, admit that we’d gone in the wrong direction and fix it in-season. Our vision when we were starting out in 2007 was to be the global plus-size destination. We believed that even when we had no stores on the east coast of Australia, and we’ve followed that sense of purpose and haven’t swayed from it much at all.
You talk about market position, and it’s not like all plus-size brands around the world have been successful – not by a long shot. Even in Australia, some of the other players haven’t had the growth or market capture that we have.
IRW: A high proportion of City Chic’s sales occur online. What are you doing to grow your e-commerce business?
PR: I don’t look at online as a different silo within our business. Our head of brand oversees marketing, customer relations, online and store design – basically all the customer touchpoints. We don’t sit there and ask, ‘What’s our online channel doing?’ We ask, ‘How many people did we sell to this week?’, and then the second question is, ‘Where did they buy?’
The other thing is that we have a much broader range online than in-store, which has been very successful for us. Our stores are 110sqm. You can have no more than 1200-1500 coat hangers in a store that size, so each coat hanger has to sing in order to pay the rent. Online doesn’t have that requirement. We tailor the range in-store towards the higher end of what she [our customer] likes because the value she sees in that leads to a higher average sell price, whereas online we can be a lot more diverse with a lot different sell prices and end uses.
We also have a good store reward program for online, so store teams own the online sale, rather than see it as a threat. Without going into the mechanics of it, the aim is to break down the barrier between store and online. In 2012, if a customer had come in with a return, the store team would think, ‘How is this going to hurt my sales?’ Now, it’s like, ‘Great! How can I help you?’
IRW: What sort of impact have you seen since launching click-and-collect?
PR: It’s a really good way to drive customers into stores, and we have found that a high proportion spend again [in-store]. The best lead you have is someone who’s already bought from you; they have the need, want and financial ability to buy from you. Click-and-collect has been a great way to invite customers to come and meet the team, maybe get an opinion of what [an item] looks like on, or try it on and if it doesn’t fit, they can get their money back straightaway.
IRW: Are you looking to roll out other omnichannel services?
PR: Our point-of-sale (POS) system is antiquated. We’ve had to change all our systems following the separation from the old SFG, and we’ve had to become a standalone business, which we’re very close to getting completed now. The next step is changing our POS, which is happening in the next 12 months, to something where you can order something online at the store, and it will arrive that afternoon.
We’ve understood the human element, if you will, but we’re not really good enough yet at the technology element. Our loyalty program is very well used, so we know a lot about all of our customers, and we want to make sure that she [our customer] knows that we know her and that we’re giving her the best experience, wherever she chooses to shop.
IRW: Updating legacy systems is a challenge for a lot of retailers, as well as a huge expense. Is that why it hasn’t been done until now?
PR: In essence, you couldn’t have done it [at SFG]. The volume and scale would have been prohibitive. Part of the benefit of us being a standalone business is that we’re able to make those decisions and be more nimble. Twelve months sounds like forever away, but I’m being realistic. We’ve changed our operating systems very quickly.
IRW: What has the process of ‘decoupling’ from the other SFG brands been like?
PR: It’s high risk in any business, but we’re still delivering sales growth. We’re expecting high-single-digit comps in this half [H1 FY19], even with all that change. My attitude is that because she [our customer] never saw which IT system we used – she just loves our range, and we’ve made sure that that hasn’t been impacted; we’ve kept our product flows the same and our website and POS working – the other problems don’t seem as insurmountable.
IRW: Besides updating the POS, what sorts of things are you looking forward to being able to do, that you couldn’t do before as part of SFG?
PR: Capital allocation is the main one. We [the brands] all fought for money; we all had to ask for capital allocation. The ability to allocate capital towards those areas that we think is right will be huge. That and being more nimble to think about IT differently are the main benefits.
IRW: You’ve stated previously that you’d consider selling on Amazon. What’s your thinking on that now?
PR: They’re currently wanting [to do] more wholesale [business] than drop-ship, and we’re not really a wholesale business in Australia. We don’t have the infrastructure required for it, and I’m not really looking to move that fast. If they want to come to us with a model that can work, we might do it. But for me, it comes down to whether our customer wants to see us on Amazon, and I’m not sure of the answer to that. I’m not sure if she’s on Amazon looking for more fashionable pieces. In America, they’ll tell you, it’s more geared towards basics and staples that you can sell higher volumes of.
IRW: I understand City Chic sells on Amazon in the US. How has that been going?
PR: We have a drop-ship or marketplace relationship with Amazon in the US, and that’s been challenging. We’ve had weeks where it’s done very little money, really insignificant volumes compared with some of our other partners like Macy’s, Nordstrom, Bloomingdale’s and Lord & Taylor. It’s night and day.
We recently started a wholesale relationship with Amazon, which is proving more successful, but again, the volumes are not super high compared with our own website, retail partners like Nordstrom and Macy’s and even some of the new online retail channels like [subscription style box] Stitch Fix and [subscription-cum-rental company] Deer & Co.
IRW: Do you see any parallels between selling through online marketplaces and the traditional concession model? Is being on a marketplace a bit like the online version of a concession?
PR: There actually are online concession models in the States, where you can store your stock in [a marketplace’s] warehouse, and they send [unsold stock] back to you after a period, which is never the best result for a retailer, I don’t believe. I’d rather have it in our warehouse, so we can sell it to one of our channels.
We have our own stores, websites and concessions in department stores. We have partnerships in Europe through a wholesale model with Zalando, a partnership with ASOS on a wholesale level and a partnership with Evans on a concession level in the UK, so it really depends what the customer wants and the best way to get it to market.
We have seen great results with our partners around the world as we try to drive brand recognition and awareness. It goes back to putting the customer at the centre of everything; we want to try to talk to her directly, but we have found that online marketplaces have been very successful internationally. Amazon has not been one of the more successful ones.
IRW: How is your concession business in Myer stores going?
PR: It has been a challenging past 12 months in our concession business. We started with 30-odd stores and we’re down to six. Myer has been a great partner with that; they’ve worked with us to try and drive the best result for our customers.
IRW: Do you see a future for City Chic concessions in Myer stores?
PR: Yes, but how long and what shape that looks like and how many locations, I’m not 100 per cent sure. I’m sure Myer has looked at the metrics and seen what it takes for us to be driving enough demand to pay the wages and rents, so to speak, and they’ve been very commercial around what that looks like. We’re in a good space at the moment and the concessions we have been performing OK. It’s been challenging, and I have no qualms saying that, but Myer has been very adaptive.
IRW: Any plans to adapt your own store network going forward?
PR: We’ve opened two new 250sqm stores. The initial reads have been excellent, and we want to roll out at least 20 of them in the next three years – all lease-dependent. It’s got to be the right ROI; we’re not going to open them just for the sake of it.
We only have 84 full-price stores in Australia – we have over 100 locations including outlets and concessions – and we think there’s scope for between 15 and 30 more. [With the bigger footprint stores], we can double those 1500 coat hangers in-store, and we want to continue to increase our lifestyle offering online.
There are relatively low-hanging opportunities to open new stores in centres that we’re not currently in, like Eastland in Melbourne. As part of our offering, we want to be accessible to as many places as we can be.
IRW: Any other trends you have your eye on?
PR: This idea of revenue attribution. In a world where the customer doesn’t see online or in-store, she sees the brand, how do you attribute revenue? She might go in-store and see a beautiful dress and deal with your wonderful team, but then go home and buy it online. That store will never see the benefit of that sale financially. You end up closing stores and hurting your overall business.
It’s very hard when you’re a publicly listed company and you take an impairment on a store that isn’t driving enough cashflow to pay the value of the capital, but you don’t know what part [the store] plays in your overall business. It’s something we talk about a lot, and I don’t have an answer, if I’m being honest. My answer at the moment is to focus on her [our customer]; look at how she spends, not where she spends, and how we can drive more revenue out of her, rather than out of that location.
We’re very lucky because we don’t have any loss-making stores. Our portfolio is very clean, so it’s not coming from a place where I’ve got 100 stores that are losing money and online is keeping me afloat.
IRW: Any trends that you think are over-hyped?
PR: Amazon. If I sold books or replicable products, it would be a real threat. But in our world, it’s not as big as the hype. Even in America, it’s not a big player in the fashion game.